Tuesday, April 20, 2010

If June Gold moves in the way I've shown in the chart that accompanyies today's tout, it could provide a low-risk entry opportunity for night owls (or perhaps early birds).  This is a bull play, but a few things would need to happen before it becomes viable.

Use a Hidden Pivot resistance at 17.870 as an upside target for the moment, but keep in mind that May Silver will need to do somewhat better than that, hitting 18.005, to refresh the bull trend on the five-minute chart. A pullback to the 17.730  sibling midpoint would be the best buying opportunity we are likely to see ahead of another thrust.

We hold 800 shares with an adjusted cost basis of 11.75 against eight May 18 calls that we shorted for 0.64.  Let's take advantage of the market-makers' propensity to rip off the public on the opening by putting in a lowball bid ourselves to cover the calls:  0.32, and you can make it a day order. _______ UPDATE:  We'll put this one on the back burner for now, since time is surely no enemy of the covered writer.

Price action Monday night was about as subtly promising as it gets.  Notice in the accompanying chart how the modest after-hours rally has taken the futures above two prior peaks, one of them "external."  The high print at 1138.60 was just a tick above the external peak (#2), but the pullback that has followed is just sufficient for us to infer that traders are reading a double top here rather than a breakout.  This could set up a nice camouflage entry opportunity along the lines shown.  This is obviously expert play, but I'd suggest treating it as a team effort in the chat room if things play out in a way that approximates my drawing. _______ UPDATE 1:47 p.m. EST):  This one played out close to the way I'd sketched it in the chart, but perhaps not close enough.  Pivoteers would have found it difficult to pull the trigger at 'X' because the B-C pullback was not sufficient.  Strictly speaking, the pullback need to hit 1134.30 to equal 0.618 of k-A; the actual low was 1136.00.  However, there was still a trade to be initiated by-the-numbers if you used a different, and arguably legitimate,  k-A segment -- i.e., the pullback from 1137.00 (Hourly chart, 4/19, 5:15 p.m. EST) to 1134.00 (7 p.m.).  If there was a question about which of the two patterns to take seriously, you could simply have entered at the 'X' of either and let time be your stop-loss.  In this case, take-off was so swift and decisive at 4 a.m. that you could not have lost. _______ UPDATE 4:58PM EST: I took pains this morning in the touts section of Rick's Picks to explain how we might exploit a potentially tradable development in June Gold. Although the opportunity did not pan out exactly as we’d hoped, it came close. I have analyzed the

Using a murky low at 6.36 made in 2003, it's possible to project a potential bull-market top at 274.80 on the weekly chart.  Although this isn't a Hidden Pivot we should plan on shorting with a 10-cent stop-loss, it could prove useful analytically to the extent it gives us a logical top for the shares of an American company that has done so many things right. The target can be used by long-term investors to scale out shares, but otherwise it is a number that should simply be held in mind as we watch the broad averages ascend to some ghastly precipice that few would have imagined a year ago.

There's nothing to guarantee that we did not bail out of our puts too soon, since the market could take a flying dive into hell today for no good reason. Regardless, in exiting May 108 puts for a small profit, we followed a chiseled-in-stone policy of never taking gains on puts -- even small gains -- for granted when we've boarded a downtrend with perfect timing.  Options are a tough enough game to beat without trying to make money on significant bear moves that occupy the stock market about 0.01 percent of the time.  So what would it take now to put the Diamonds back on an unmistakably bullish track? Let's set the bar at 111.26, a midpoint resistance shown in the accompanying chart. I'll further stipulate that that number be exceeded on a closing basis before we infer that still higher prices are likely.

We used to joke here that it might take a nuclear war to end the bear rally begun nearly 14 months ago, but we’re starting to wonder whether it’s actually true. There was a time when a one-two punch of exceptionally bad news such as occurred last week would have knocked the stock market for a loop. There was a natural disaster in the form of a volcanic eruption in Iceland that brought air travel throughout Europe practically to a halt. Then, on Friday, the SEC brought civil fraud charges against banking-sector locomotive Goldman Sachs that left the firm fighting for its reputation. The Dow responded with a mere 126-point drop, so perhaps we shouldn’t have been surprised on Monday when selling appeared to dry up with the blue chip average down just 40 points. That was about as bad as things got before shares turned higher around mid-day, eventually recouping the lost ground and then some. The Indoos closed at 11092, up 73 points. At the opening bell on Friday, we’d taken a small short position in the form of some Diamond May 108 puts bought for 0.86. They traded as high as 1.52 within hours, allowing us to take partial profits that knocked our cost basis down to .0.46. On Monday morning, however, when slowly building strength in the underlying shares drove put options lower, we sold our remaining short position for 0.96. Since that’s more than we’d effectively paid for the puts, we were able to book a theoretical gain of 0.50 per option. For Frustrated Bears We have employed this same strategy over and over, getting short every time a stock or futures contract that we follow closely rallies to a promising Hidden Pivot target.  For frustrated bears in particular, this strategy has worked well (although